Why aren't there more data-driven companies?

And, as companies make progress towards  their data driven goals, the impacts will be significant.

‘All of this will transform the role of leaders and managers. The need to supervise routine tasks is finally over,’ they proclaim. (1)

In an AI controlled environment, digital technology examines vast amounts of data – identifying issues ranging from day-to-day production problems through to changes in how customers are using the company’s products. Decisions are taken in an automated fashion – without human input.

Lansiui and Lakhami’s predictions may look to be a little futuristic - but the tide is turning.

Recent developments in supply chain management, for example, are placing a high focus on the use of AI and analytics to identify ‘hot spots’ and recommend actions based on an understanding of complex business processes – in an environment where demanding service levels have to be met.

However, despite an increase in the amount invested in data related technologies, the reality is most companies are struggling to make progress.

In their 2021 annual survey of the state of data in business, New Vantage Partners report that only 24% of companies classified themselves as truly data-driven, meaning they:

• Manage data as a business asset.
• Drive innovation with data.
• Understand their market and competition - using data and analytics.
• Take business decisions based on date – rather than human instinct.
• Forge a data culture across the organisation.

The low number of truly data driven companies is despite 99% saying they had invested in data initiatives – and 92% saying their investments in data are increasing.

Only 8% of respondents in the survey identify limitations in technology as the key issue. (2)

A breakdown of the issues slowing progress include:

1. Low levels of executive support and buy-in

A 2016 survey by McKinsey identified executive sponsorship as the key determinant of whether an organisation was on the path to becoming data driven. (3)

However, in a subsequent survey in 2021, 36% of executives said their CEOs and senior colleagues were setting the wrong example - by relying on intuition to make decisions and paying ‘lip service’ to available data. (4)

2. Lack of documented data strategy

In the New Vantage survey, only one third of companies reported having a documented and well-defined data strategy.

Unless what is being measured closely aligns with business objectives – and the way this is going to be achieved is documented in a clear data strategy - there is less chance of employees having the relevant and usable data. 

3. No single version of the truth – or poor data quality

In a 2019 Accenture study, 33% of companies reported they did not trust the quality of their data sufficiently to use it in an effective way. Data-driven initiatives will fail if employees don’t have faith in the numbers. (5)

In a further study in 2019, 47% of the marketing managers who took part said that their data was siloed and hard to access – creating difficulties in building a single version of individual customer profiles and the products they were buying. (6)

4. Poor data literacy and resource issues

In the Accenture study, only one fifth of employees expressed confidence in their data literacy skills – the ability to ‘read, understand, question and work with data. Nearly three quarters felt they were poorly trained to work with data.

A 2021 article by Deloitte titled ‘addressing the analysis talent shortage,’ highlighted the growing demand for data analysts – and the problems companies were facing as demand for resource outstripped supply. (7)

5. Poor change management

For companies aiming to be data-driven there is a significant shift required in mindsets and behaviours. Insufficient time and resource are allocated to facilitating these culture changes.

Without a high level of training and support, employees can struggle to understand the importance of the change, what’s in it for them – as well as how to get the best out of the tools available.

Given the scale of the change needed for companies to become data-driven, senior leaders may question if it’s worth making the investment to develop the data culture. Some companies do nothing with the data that is available to them – while others carry out analytics in small pockets of their business.

However, a 2019 survey by Deloitte (of 1,000 executives in companies with over 500 employees,) found that those who reported having a strong data culture were twice as likely to have met business targets and financial goals in the preceding 12-months. (48% v 24%)

The task of developing ng a strong data culture across a large company is no easy project. However, with appropriate technology in place, a clearly defined data strategy and resources in place, progress can be made.

In the words of former CEO of General Electric – ‘change before you have to.’

Bibliography

1.     Competing in the age of AI, Marco Lansiui and Karim Lakhami

2.     The Journey to Becoming Data-Driven, New Vantage Partners 2021

3.     The Need to Lead in Data and Analytics, McKinsey, April 2016

4.     Despite Working with Data Daily 36% of Executives go with their Gut, Talend, 2021

5.     Closing the Data-Value Gap, Accenture, 2019

6.     Marketers say Data is Siloed and Difficult to Access, KO Marketing, 9 October 2019

7.     Tech Looks to Analytics Skills to Bolster it’s Workforce -Addressing the Analysis Talent Shortage, Deloitte, May 2021